How's Your Credit?
The road to home ownership doesn't start with getting pre-approved by a lender or with choosing a real estate agent. In reality, the home buying process starts and ends with your finances. To propel your dreams of homeownership forward, you must consider your FICO score along with the type of loan for which you'll qualify in Fresno.
A FICO score is a collection of your years of credit history based on a model developed by Fair Isaac and Company. Most people traditionally have a score of 600, but scores are tiered from 300 to 850. Job loss has been common in the last few years, but FICO scores aren't necessarily adjusted "on a curve." A low score is just that and often means you can't get a loan. Some of the factors in deciding your FICO score include:
- Payment History — How many times do you make late payments?
- Credit to Debt Ratio — How much do you owe versus your available credit?
- Credit Inquiries — How many times has your credit history been accessed by someone other than you?
- Types of Credit — Do you have a healthy mix of loans and credit cards?
Lenders want to ensure that giving you a loan is a safe move. Your credit score gives lenders an insight into what type of borrower you'd be based solely on your credit history. You'll need a score of at least 700 to get a satisfactory interest rate. If your score is less than that, you can still qualify for a loan, but the interest paid in the long run could be more than double the amount of someone having a superior FICO score.
We're used to working with all levels of credit history. Contact us and we can help you get on the right track to the home of your dreams.
How do you boost your credit score? Improving your FICO score takes time. It can be hard to make a significant change in your credit score with quick fixes, but your score can improve in a year or two by monitoring your credit report and by wisely using credit. The most important thing is to know your FICO score. You'll improve your credit score by using these helpful hints:
- Ensure that your credit history is correct. If you find incorrect items on your credit report, write to the bureau asking that the item be removed. If you have a common name or the same name as a family member, you'll want to pay extra attention to make sure the activity reported is correct.
- Spread your debt around. At first, this doesn't seem like a good idea. But, you don't want to have one card that is maxed out and have your remaining cards at a zero balance. It's better to have each of your cards at an even balance than to have all of your debt sitting on a single card.
- Store cards and gas station cards. For those who have no credit or less-than-stellar credit, department store credit cards and gas credit cards are ways to begin your credit history, increase your credit limits and have a solid payment history, which will raise your FICO score. You must always avoid keeping a large balance for too long because these types of cards normally have a higher interest rate.
- Use your credit. Whether you're just getting started with credit, or if you've got older cards, use your cards to make sure your accounts maintain an active status. But, make sure you pay them off in one or two payments.
- Pay on time. Payment history is a huge factor in your FICO score. It's one of the reasons people who have recently experienced job loss see the biggest hit in their credit score. Yes, it takes longer to build up your credit with payment history, but it's the surest way to prove that you're able to make payments to a lender.
Now that you know more about credit reporting, you'll be able to successfully take the first steps to homeownership, and that is improving your FICO score. Know that when you're ready to apply for a loan to purchase a home, you'll want to keep your lender applications within a two-week window to avoid adverse effects on your credit score. With the help of Real Pro Properties, the loan application process is sure to go more smoothly so you, too, can become a homeowner.
Get more information by visiting myFICO.com, Fair Isaac's informational site and review your credit history for free at annualcreditreport.com. And, for a small payment, you can get your FICO score from each bureau on their websites: equifax.com, experian.com and transunion.com.